SEC v. Nagler1 is the second enforcement action charging an investment adviser with undisclosed conflicts of interest since Chair Paul Atkins began his tenure on April 21, 2025. The Securities and Exchange Commission (SEC) announced the first of those cases, In the Matter of Transamerica Retirement Advisors, LLC ("Transamerica"),2 just four days after Chair Atkins took office, on April 25, 2025. Both filings acknowledge the SEC's obligation to allege conflicts of interest that are "material" to investors in connection with alleged breaches of fiduciary duties under the Advisers Act.3 In this regard, the filings are consistent with the First Circuit's recent decision in SEC v. Commonwealth Equity Servs., LLC, which vacated a United States District Court's grant of summary judgment to the SEC on the basis that a jury should decide whether the conflicts at issue were "material."4
Nagler also serves as a reminder for advisers to check their "may" disclosures in light of developments in their business, and that the SEC's antifraud jurisdiction extends to state-registered advisers with assets below the threshold for registering with the Commission.
On June 2, 2025, the SEC filed a litigated action against David A. Nagler ("Nagler") and his investment advisory firm, New Line Capital, LLC ("New Line"), alleging fraud and breaches of fiduciary duties under the Investment Advisers Act of 1940 ("Advisers Act").5 The complaint alleges that Nagler and New Line promised to ensure their advisory clients never paid advisory fees exceeding 2.0% of assets under management when, the SEC claims, many of their clients paid more than that amount.6
The complaint further alleges that Nagler and New Line hid material conflicts from clients by failing to disclose Nagler's practice of charging additional fees on a discretionary basis without first obtaining client approval.7 According to the SEC, New Line's brochures disclosed that clients "may" be charged discretionary fees, but further stated that New Line would provide clients with an agreement specifically addressing any such fees.8 The SEC interpreted this as an assurance that discretionary fees would not be charged without advance client approval.9
In the SEC's view, the failure to disclose discretionary fees – and Nagler's financial interest in charging them – denied clients a full and fair opportunity to determine whether to continue using New Line's advisory services.10 Importantly, given the SEC's opportunity to frame its allegations in the context of a litigated action, the complaint explicitly alleges facts to support an allegation that the undisclosed conflict was "material" instead of holding to the Enforcement Staff's previously stated position, recently rejected in Commonwealth Equity Servs., LLC, that investment adviser conflicts are per se material.11
Nagler reads as a variation on the typical "may" disclosure case (in which the SEC alleges that disclosing the possibility of conduct is misleading when that conduct is actually underway) because New Line allegedly told clients not only that discretionary fees "may" be charged, but that such fees would not be charged without advance notice. Arguably, the alleged promise to provide advance notice minimized the effectiveness of the disclosure that discretionary fees could be charged in the future and exacerbated the lack of disclosure when New Line actually charged those fees without notice. The SEC's litigation release, however, emphasizes that New Line misled investors by disclosing that it "may" offer hourly fee services "when, in fact, New Line was providing such services," and Transamerica, which the SEC released early in Chair Atkins's tenure,involved the typical "may" fact pattern.
Together, these cases signal that an Atkins-led SEC may stay the course in bringing disclosure cases involving potential conflicts (in line with the Commission's June 5, 2019 guidance for investment advisers)12 and provide an apt reminder that advisers should regularly review "may" representations when drafting and updating disclosure documents.
Nagler is noteworthy for the additional reason that it concerns a state-registered investment adviser that had de-registered with the Commission five years before the conduct at issue, in 2014.13 Just as the SEC's antifraud jurisdiction can extend to transactions in securities that are not publicly traded or registered with the Commission, it extends to investment advisers who are not SEC-registered or do not meet the requirements for registration.
Approximately six weeks into Chair Atkins's tenure, it remains to be seen whether disclosure cases against investment advisers will be a significant part of the SEC's Enforcement agenda, including because a new Director of Enforcement has yet to be announced, but Transamerica and Nagler provide an early indication that these cases are not among the new administration's strongly disfavored categories of enforcement actions.
Footnotes
1. SEC v. David A. Nagler and New Line Capital, LLC, Case No. 25-cv-516 (D.N.M., June 2, 2025) ("Nagler"), available at https://www.sec.gov/files/litigation/complaints/2025/comp26319.pdf.
2. In the Matter of Transamerica Retirement Advisors, LLC, Investment Advisers Act Release No. 6876 (April 25, 2025) ("Transamerica"), available at https://www.sec.gov/files/litigation/admin/2025/ia-6876.pdf.
3. See Nagler, supra, at 19, ¶ 66 (alleging that undisclosed conflicts of interest arising from practice of charging hourly fees on a discretionary basis were "material because, among other things, a reasonable advisory client would want to be informed of the conflicts of interest and have an opportunity to give informed consent to the conflicts or reject them and would consider the conflicts of interest when deciding whether to engage (or continue to engage) the investment advisory services of Defendants."); see also Transamerica, supra, at 2, ¶ 16 (alleging failure to disclose "material conflicts of interest" under the Advisers Act).
4. SEC v. Commonwealth Equity Services, LLC, 133 F.4th 152, 167 (1st Cir. 2025) (concluding that a reasonable jury could find that additional disclosures "with more precise descriptions, added to the already-disclosed conflicts of interest" may not have "so significantly altered the total mix of information made available" to reasonable investors).
5. Nagler, supra, at 1-2, ¶
1.
6. Id. at 2, ¶ 3.
7. Id. at 2, ¶ 4.
8. Id.
9. Id. at 15, ¶ 48.
10. Id. at 19, ¶ 64.
11. See, e.g., "Conflicts, Conflicts Everywhere" speech by the then head of the SEC's Asset Management Unit (Feb. 26, 2015) at 8 ("Conflicts of interest are material facts that investment advisers, as fiduciaries, must disclose to their clients."), available at https://www.sec.gov/newsroom/speeches-statements/conflicts-everywhere-full-360-view.
12. "Commission Interpretation Regarding Standard of Conduct for Investment Advisers" (June 5, 2019) at 25 ("[D]isclosure that an adviser 'may' have a particular conflict, without more, is not adequate when the conflict actually exists."), available at https://www.sec.gov/files/rules/interp/2019/ia-5248.pdf.
13. Nagel, supra at 1, ¶ 1.
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